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Liberty Mutual’s tough 2017 is largely to blame for the decision to lower its rating outlook to stable from positive. Fitch Ratings explained that the move stems from “modest deterioration in key credit metrics in the company’s capitalization.”

Fitch added: “Underlying financial performance of the company has generally improved relative to higher rated peers in recent years despite a catastrophe driven calendar year underwriting loss. However, weaker-than-peer capitalization has constrained the rating.”

At the same time, Fitch affirmed Liberty Mutual’s insurer financial strength ratings at ‘A-‘ (Strong).

Fitch cites Liberty Mutual’s tough 2017 as a contributing factor to the outlook change, as its combined U.S. statutory surplus dropped by nearly $2.1 billion. This stemmed from a net loss above $1 billion, coming largely from Hurricanes Harvey, Irma and Maria-related catastrophe losses that reached $3.6 billion, up from $1.7 billion the previous year. Fitch ended 2017 with $17 million in net income, compared to more than $1 billion the year before. Its combined ratio was 105.6 for the year, up from 98.3 in 2016.

Fitch said that it sees Liberty Mutual Group as having an “adequate” capital cushion for any operational and financial risks. But it said that Liberty Mutual has weaker metrics “than most companies of its size and scale.”

That said, Fitch said it expects Liberty Mutual will achieve a modest underwriting profit in 2018, assuming there is normal catastrophe experience. It also pointed out that Liberty Mutual has inked several reinsurance transactions designed to limit its risk of future material reserve charges from workers compensation and asbestos environmental reserves, plus pre-2017 reserves from its recent Ironshore acquisition.